A variety of machine tools have been introduced in recent years which embody the concept of "automatic tool changing". Such machines function automatically (or semi-automatically) under numerical controls and employ a tool storage device in which all of the metal cutting tools to be used on a given workpiece are stored. The tools perform milling, drilling, boring, tapping, reaming and various other metal cutting functions. All of such tools have a shank which is received within the socket of a drive spindle of the machine. Many automatic tool changing machines incorporate some type of tool handling mechanism by which the tool is extracted from a tool storage device and is inserted in the machine spindle. In other machines the entire storage device is moved to position a desired new tool in alignment with the machine spindle and the spindle itself extracts the desired tool from the tool storage member. Many machines have required the use of expensive tools having special flanges or the like which are gripped by a tool handling mechanism or have means for receiving coding rings or the like by which the tool can be identified in the tool storage device. Many tool changing mechanisms have either been extremely bulky and/or expensive in construction or have lacked adequate tool storage capacity. The tool changer of the present invention solves the basic tool handling and identification problems at a minimum cost and without compromising the performance of the machine or imposing undue limitations on the number or types of tools which can be used.